ECSI Blog

Monday, August 30, 2010

Perkins Call-In to Congress Days: September 15 & 16In order to show support for extending and providing adequate funds for the Perkins Loan Program, COHEAO has planned Perkins Loan Call-In to Congress Days for Wednesday, September 15 and Thursday, September 16 for the Washington offices of Members of Congress. Please be sure to contact your legislators (House and Senate) and ask them to support the Perkins Loan Program by extending and funding it.Additional materials are available on at www.coheao.organd please feel free to contact COHEAO with any questions or concerns. When contacting your Representatives, please ask them to cosponsor H.R. 5448, the "Perkins Loan Extension Act," a bill introduced by Congressman John Spratt that has bipartisan cosponsorship. Please also notify them of the critical need for appropriations to fund cancellations and provide more financing for students.To locate the contact information for your legislators, please visit www.contactingthecongress.org(an excellent online resource for this information, but not affiliated with COHEAO). As always, if you have any questions on contacting your legislators, please contact Wes Huffman (whuffman@wpllc.net). Please also share any feedback you receive from your calls with us.This is important, so please call. Thank you!

Thursday, June 24, 2010

For over half a century, the federal Perkins Loan program has helped low-income students like Whitney D. Lyons afford college. Ms. Lyons, who graduated from Gonzaga University two years ago and is now a financial-aid counselor there, borrowed $15,000 in Perkins Loans to supplement her other government aid, including Pell Grants and Stafford Loans.

Ms. Lyons's parents, a taxi driver and a nursing-home worker, were unable to pay for her education. She said that her Perkins loan, for which the government subsidized the interest until she graduated, was a lifeline.

But whether future students will be able to receive these low-cost loans remains uncertain. The program is set to expire in 2012, and Congress has yet to come up with a solution to extend its benefits.

Created by Congress in 1958, the Perkins Loan program provides low-interest loans to financially needy students through a cost-sharing agreement between the federal government and colleges. About 520,000 students received Perkins Loans, averaging $2,125, for the 2009-10 academic year.

Perkins dollars are now distributed by campuses to the most financially needy students first, often those who are eligible for Pell Grants. Even so, in 2007, roughly 23 percent of recipients were dependents who came from families earning more than $60,000 a year. The loans, which carry a 5-percent interest rate, have more favorable terms than the far more common Stafford Loans.

The program's fortunes have fallen, risen, and then fallen again in recent years. President George W. Bush proposed eliminating Perkins, but the Obama administration has sought to expand and overhaul the program, pitching it as key to improving affordability for both low-income and middle-class students.

Still, the president has been unable to move his plan through Congress. A provision to increase the size of the loan program from $1-billion per year to $6-billion was cut from the final version of the legislation to overhaul student loans that passed this year. Delays in passing the bill had reduced the savings available for student aid.

Even if Congress pushes back the end date of the Perkins Loan program, which several lawmakers have said they intend to try to do, Perkins would probably need an infusion of federal dollars to keep providing awards at the current level.

Congress has not added capital to the program since 2004. This year federal lawmakers also did not reimburse colleges for the cost of forgiving the Perkins loans of students who take public-service jobs.

Without those sources of money, colleges that administer Perkins loans must depend on loan repayments and interest paid on existing Perkins loans to make new loans. That limits the number of new loans colleges can make, and the amount of money available for helping new borrowers is further squeezed by defaults.

It could be difficult for Congress to allocate large sums of new money for Perkins, given that lawmakers just spent billions on student aid in the student-loan overhaul. Supporters of Perkins say the end of the program could mean dire consequences for students.

"Students won't be able to get the lowest-cost loans available to them," said Harrison M. Wadsworth, executive director of the Coalition of Higher Education Assistance Organizations, which lobbies on behalf of the Perkins program. "For some, it might be the difference between being able to attend college. Others will graduate with more debt."

A Short-Term Extension

Advocates for the program say that their immediate goal is to push back the 2012 end date.

Rep. John M. Spratt Jr., a Democrat of South Carolina, and Rep. Timothy H. Bishop, a Democrat of New York, plan to introduce legislation to extend that deadline by a year.

"That would be a very serious mistake if we were to allow this program to disappear," Representative Bishop said. "We need again to buy some time with the one-year extension of existing law and try to put together a robust, multiyear extension."

But even if an extension passes, the larger question remains of what a new Perkins Loan program would look like.

Under the plan President Obama has advocated, federal dollars would no longer be allotted to colleges based strictly on historical formulas and usage rates. Instead, a portion of the money would be used to reward institutions that hold down their tuition or graduate large numbers of low-income students (though colleges would be guaranteed to receive at least as much as they do now).

"The administration still absolutely supports modernizing Perkins and expanding it so it's available to more schools, so that we can reduce the need for students to use more-expensive private loans," said Jane Glickman, a spokeswoman for the Education Department.

The changes the Obama administration has proposed have been controversial among colleges. The administration suggested that the Education Department, instead of colleges, directly administer the loans, and that the federal government stop subsidizing interest payments for students still in college.

Student-aid advocates and financial-aid officials opposed the interest plan, saying that the proposal would create a burden for low-income students. They are also wary of plans to tie Perkins to tuition.

Representative Bishop said Congress might finance the program in its current form or back a model similar to the president's. But given the controversy over the president's proposed changes, agreement on the right approach could be challenging, potentially making passage of an expansion of the program difficult.

"There's a lot of hurdles here," Mr. Bishop said. "We clearly have to pay for it; that's going to be a challenge. But I do think that if we were to allow Perkins to lapse, we will be taking a significant step backward in terms of the access and affordability goals that we have been pursuing."

Diane Auer Jones, who was an assistant secretary for postsecondary education in the Bush administration, said she favors Perkins loans over high-interest private loans as a way to help middle-income students. But she said that extending Perkins may not be financially possible.

"The big issue is: Can we afford it?" she said. "With a $1.6-trillion deficit, there are lots of really good programs that we're going to have to cut."

Whether Congress would pass another piece of student-aid legislation on the heels of the student-loan overhaul or whether an expansion of Perkins could be attached to another bill is also unclear.

"We have a desire to keep working on this until we get a resolution," said Cynthia A. Littlefield, director of federal relations for the Association of Jesuit Colleges and Universities. "We're obviously in limbo."

Depletion of Dollars

College officials say that extending the 2012 deadline is not enough to save the program, even if colleges could continue to make new loans from repayments. Aid officials say that unless Congress allocates new capital or makes up for forgiven loans, cash will eventually dry up.

According to estimates in the president's budget for the 2011 fiscal year, approximately 490,000 students are expected to receive Perkins loans next year—30,000 fewer than this year.

Supporters of the Perkins program say more capital is particularly needed during the current economic crisis, when colleges are scrambling to help growing numbers of students struggling with finances.

Catherine M. Simoneaux, director of the Office of Scholarships and Financial Aid at Loyola University New Orleans, said more students were defaulting on their Perkins loans. And colleges rely on payments from borrowers who have graduated to make new loans.

"We can only lend what we collect," she said. "And when you have a recession, you don't collect as much."

Ms. Simoneaux said the university still expected to lend about the same amount in Perkins dollars next academic year as this past year, about $420,000, because many local students' economic fortunes were improving post-Katrina and because Loyola was working hard with students to combat default.

But Alisa M. Abadinsky, director of university student financial services and cashier operations at the University of Illinois at Chicago, said it would lend close to $2-million in Perkins loans next academic year, down from between $2-million and $3-million this year.

Ms. Abadinsky said the university was owed roughly $270,000 for forgiven loans, which would "definitely impact a good number of students that we could have awarded funds to."

Helping Needy Students

Supporters of the Perkins Loan program say they are optimistic that Congress will extend the 2012 deadline and eventually add much-needed capital to the program. But if the program does expire, many needy students could be left scrambling for ways to pay for college.

Mr. Wadsworth, of the higher-education-assistance group, said the end of Perkins could lead more students to take out unsubsidized Stafford Loans or private loans, both of which carry higher interest rates than Perkins loans.

The current interest rate for unsubsidized Stafford loans is 6.8 percent, and that interest accrues while students are in college. Private loans have significantly higher interest rates than government-backed loans, sometimes twice as high, and less-forgiving repayment options.

"We would hope if they take the money back, they would come up with an alternative loan program, especially for the Pell-eligible students," Ms. Simoneaux said. "The private lending programs are not optimal for anybody, especially for a first-generation Pell-eligible student."

Ms. Lyons, the Gonzaga graduate, said she would have had a hard time getting a co-signer for a private loan because her parents could not have passed a credit check. Going to Gonzaga might not have been possible without a Perkins loan, she said.

For other students, like Lori L. Hardesty, who graduated from the Johns Hopkins University in 1996, the loan-forgiveness option was key. Ms. Hardesty, who was raised in foster care after her mother died and her father's struggles with mental illness worsened, took out $11,200 in Perkins loans to help pay for college.

After graduation, she began working with the Choice Program, run by the Shriver Center at the University of Maryland-Baltimore County. Through the program, Ms. Hardesty worked with youths in the juvenile-justice system and earned $17,500 a year. Ms. Hardesty is now a program coordinator for service learning at the Shriver Center.

"It was a big risk for me taking this low-paying job," she said. "I knew I was doing the right thing, but I was not in the best financial situation to pay the bills and also pay my school loans."

She credits the Perkins loan, in part, with helping her pursue public service. Most of that loan, $9,500, was forgiven after she realized she was eligible for loan cancellation.

Tuesday, March 23, 2010

The student aid portion of the budget reconciliation legislation that a deeply divided House of Representatives passed late Sunday was completely overshadowed -- in the depressingly partisan debate on the House floor, the reams of national news coverage, and the public’s consciousness -- by the bill’s health care provisions.

But when all the shouting the voting was done, Congress’s Democratic majority had indeed given approval to what supporters, without engaging in hyperbole, characterized as a dramatic reshaping of the federal student loan programs. The legislation (H.R. 4872) would shift all lending from the bank-based Federal Family Education Loan Program to the Direct Loan Program and use $61 billion in savings over 10 years to shore up the Pell Grant Program and for a handful of other education priorities.

Whittled down in recent weeks by budget realities, the student aid legislation is a pale imitation of the version that the Obama administration envisioned early on, and that the House passed last September.

Gone -- due to diminished projections of the savings generated by the loan overhaul and the need to balance out health care spending in the overall bill -- are billions of dollars to reduce the interest rate on students’ loan payments, remake the Perkins Loan Program, and fund President Obama’s American Graduation Initiative, aimed at helping community colleges graduate 5 million more students by 2020.

Also sacrificed to practical realities are most of the Obama administration’s efforts to prod recipients of the new federal money to change their practices, through accountability provisions that would have been part of the American Graduation Initiative and the proposed $2.5 billion College Access and Completion Fund, which has been jettisoned in favor of a smaller $750 million expansion of the existing College Access Challenge Grant Program.

Thanks to a last-minute scramble to find some new money to help community colleges meet exploding demand for enrollment amid state and local budget cuts, the final version of the legislation retains $2 billion to fund a Department of Labor career training program that was created in last year’s economic stimulus bill but never funded. It would direct $2.55 billion over 10 years to historically black, Hispanic-serving, and tribal colleges. And it would provide about $1.5 billion to expand income-based repayment options for student loan borrowers.

While there will surely be disappointment in various quarters about the final contours of the student aid legislation, college and student leaders focused Sunday on what they liked about the bill -- most notably that it would apparently ensure that the government will be able to meet the exploding demand for the Pell Grant Program without taking anything away from recipients now or in the near future.

“Without the funds made available by this legislation, 8 million low- and middle-income students who rely on Pell Grants could see their grants cut to maximum award levels last seen in the late 1980s. Others could see their grants disappear entirely,” the American Council on Education and 29 other higher education groups wrote in a letter Saturday urging Congressional passage of the combined health care/student loan measure.

“In a student aid system that has been de-prioritizing federal grant programs, this bill will remove wasteful and unwarranted middleman subsidies that are currently going to big banks and lenders and direct that money to student grant aid,” Rich Williams, higher education associate for the U.S. Public Interest Research Group, said in a prepared statement Sunday. “This investment will provide immediate relief for millions of students who might otherwise abandon their college aspirations or drop out of college altogether when forced to rely on loan debt to pay for it.”

Friday, December 11, 2009

On February 14th, 2010 Regulation Z of the Higher Education Opportunity Act’s Title X will take effect. Regulation Z consists of three disclosures provided to the borrowers of private education loans at specific intervals of the loan application and approval process.

These disclosures are required for every private education loan a school or lender provides and must contain special HEOA requirements and content. This includes all Institutional and Health Professional Loans, which fall under the Department of Education’s definition of a private education loan.

Most private education loans currently do not contain disclosures of any type. In order for a school or lender to provide these three required disclosures they would have to print and mail them at each interval and then patiently wait for the student’s response. This will waste time, money and valuable resources and it can delay the approval and disbursement process.

ECSI’s Regulation Z Solution will give your school back that valuable time and energy by creating the disclosures automatically during and after the application process, and can save your company costly resources by providing all three disclosures electronically.It is a fully automated and integrated process designed to make it as easy and intuitive as possible for both the student filling it out and the school handling it.

“We are extremely excited to bring this regulation z solution to market, as we feel there is no other company out there that can integrate the required disclosures like ECSI can.We take pride in knowing that our client base can count on us to keep them in compliance and at the forefront of technology” – John Lynch, President / CEO of ECSI

Thursday, August 20, 2009

Most college financial aid officers oppose the Obama administration's plan for expanding but significantly altering the Perkins Loan Program, according to a survey released Wednesday by the National Association of Student Financial Aid Administrators. The administration's proposal, unveiled as part of the president's budget blueprint for 2010, would turn the program from one that provides about $1.5 billion in loan funds to students at hundreds of institutions to a broader one that provides about $6 billion to students at many more colleges. But several aspects of the proposal -- including ending the practice of the government paying interest on the loans while borrowers in college, and requiring significant matching funds from colleges -- earned opposition from the aid officers surveyed. Nearly four in five said they preferred the current version of the program over the proposed one.

Monday, June 29, 2009

Congress continues to work on proposals to change the Perkins Loan Program dramatically. As we have noted in the past, the Congress is responsible for changing the law on how Perkins operates. Congressional staff in both the House and Senate are working on proposals, and this remains a priority of Secretary of Education Duncan and of President Obama. The House Education and Labor Committee is likely to consider legislation changing Perkins during July. COHEAO has submitted testimony with our proposals for modifying the Perkins Loan Program to the Committee. That testimony and a set of talking points are at www.coheao.org. Some updated and modified proposals are being prepared now and will be submitted soon to the House and Senate.

As Congress begins to write reconciliation legislation, the COHEAO Board of Directors has been working to develop a set of priorities for the Perkins Loan program. The Board has decided on major priorities for the program: 1) retaining as much of the in-school interest benefit as possible; 2) continuing school control over both the distribution of loan funds and in working directly with student borrowers in servicing the loans; 3) making sure existing Perkins institutions are able to continue lending at current levels and that their rights to their institutional funds are preserved.

One of the most student-friendly features of the Perkins Loan Program is the in-school interest subsidy. COHEAO would like to continue to explore the possibility of maintaining as much as possible of the in-school subsidy, even including allowing institutions to provide the funding for such a subsidy through some form of an institutional match.

In the expanded Perkins Loan Program as proposed by President Obama, servicing arrangements would be based on factors such as cost, experience, and customer service. COHEAO believes that schools that wish to service their Perkins portfolio in the same manner as the current Program should be allowed to do so. This will maintain the competitive servicing model and functionalities that exist at the campus level for the existing and expanded Perkins Loan Program. The benefits derived from the interpersonal relationships between the servicers, institutions, and the borrower are a unique attribute of the Perkins Loan Program resulting in minimal cost and great potential benefit to the Federal Government.

COHEAO urges you to call or write your Members of Congress and let them know your views. It is especially important for those of you who have members of the House of Representatives Education and Labor Committee in your state to contact them right away. That Committee is in the process of writing legislation now. To see how to write your member of Congress and for some sample letters, go to www.coheao.org.

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